A mysterious acronym: NFT. And an equally vague name: Non Fungible Token. What is actually behind this new concept? We talk a lot about NFTs, often to mock them or to make fun of those who buy them at high prices. To understand exactly what it is and what lies behind these three letters, it is not so easy. Because you must have already assimilated other complex concepts – the blockchain, cryptocurrencies, the metaverse and the Web3 – before approaching NFTs.
Brief summary: blockchain is a kind of completely decentralized database, shared by all its users. It is a technology for storing and transmitting information in a traceable but also anonymous way (at least in pseudonymity). cryptocurrency are virtual currencies based on the blockchain and an encrypted computer protocol. the metaverse is a virtual world where everyone comes in the form of an avatar. the web3 is the new internet, which encompasses all these concepts and should gradually replace the centralized net dominated by Gafam (Google, Amazon, Facebook, etc.) as we know it today.
1. What is the definition of an NFT?
NFTs are non-fungible tokens, ie unique virtual tokens. Units of data stored in the blockchain. It is a kind of certificate of authenticity of a unique and non-exchangeable digital asset. Specifically, money is “functionable” because you can exchange one euro for another without changing anything. It can also be divided differently (1 euro, 5 euro, 10 euro) and the offer is unlimited or almost.
A non-fungible token is an unparalleled asset. This is the case of a work of art, but also of owning a house (shape, location, etc. are unique) or a collector’s card. Of course we can reproduce a painting, but the original always has more value. Then, stored in the blockchain, the NFT also serves as a certificate of authenticity thanks to the system’s cryptography. It cannot be altered or, in theory, stolen. At least as long as you do not provide any personal information, such as the access code to your virtual wallet, the Wallet, in which your NFT is stored.
2. What is the importance of NFT?
Specifically, we assume a world where the creator of unique content – a digital work, for example – publishes his work somewhere on the internet. This can be reused (copied) without her knowledge without her control and the work itself will be extremely difficult to monetize. NFTs allow the person to self-publish an original work and benefit from it for the rest of their life. Whatever happens, she will forever be the author.
For example, she will sell it for the first time (with its certificate of authenticity that will follow the work for the rest of its life). If it is ever resold later on, the author or author of the work may receive a small commission on the new transaction. No matter what happens over time, this person will always be considered the origin of the work and will continue to benefit from it through resale. And she can manage the reproduction and copyright rights as she pleases. This is why owning a pair of Nike in NFT does not entitle you to freely use the image.
3. Are NFTs only about art?
Absolutely not. They are reduced to that by the buzz effect, but it can be unique about anything. It can be anything digital: a drawing, music, the original script of a movie, a tweet, a fashion item to dress up your avatar in the metaverse… or even “phygital” goods, ie it’s a digital copy of something in real life. For example, the purchase of a collector’s watch or a designer bag that is also reproduced virtually.
This could be to use it as an accessory in a metaverse, but also simpler as a sort of identity card for good. This NFT stores the date and place of creation, the origin of the components (traceability), the carbon footprint, the name of the employee who manufactured the good, etc. Data about the life of the product can then be added to this. product (date of repair, type of intervention, etc.). The same goes for owning an apartment. Instead of owning notarized papers, one can imagine an NFT that stores all title deeds and transaction records.
4. How do I create NFTs (and who can)?
Anyone can make an NFT. The easiest way, of course, is to create a unique piece of art. After the digital file is created, you need to choose the blockchain you prefer. Usually, Ethereum wins. You must then create a Crypto Wallet to be able to recover the money from the sale of your NFT. There are thousands of them (MetaMask, ZenGo, eToro, Coinbase, Binance…).
Third step: register on a marketplace. It is a portal where NFTs are sold. The best known platform is OpenSea, but there are many more (Rarible, Mintable, Nifty Gateway, etc.). These digital art galleries sell your works in exchange for cryptocurrencies. After your account has been created, you must complete the information on your NFT and electronically sign the documents and authorizations for sale. After this step, your NFT will be available on your Wallet. It will not disappear until the sale is made and the agreed amount has been transferred.
5. What can NFTs be used for?
In addition to art, NFTs are also interesting in many other areas. We have mentioned the title deed of real estate or even a luxury watch. This also applies to tickets to a concert or a sports game, video games (not the property of the game itself, but objects in this game) or even collectibles.
But beware, an NFT can be misleading. According to an analyst who has thoroughly reviewed the OpenSea marketplace, about 80% of NFTs registered on this platform are pirated works of art, fake collections, or spam. So beware if you ever dream of becoming an NFT collector or checking out this market (90% of NFT buyers do this in hopes of getting rich). Look closely at who is selling this NFT and whether they really own the rights.
Roller Coaster Values
The artist Mike Winkelmann, aka Beeple, certainly made an impression in 2021 during a spectacular auction at Christie’s where one of his digital artworks was sold for $69 million. But the value of an NFT fluctuates wildly. This is evident from the first tweet from Twitter founder Jack Dorsey.
Converted to NFT, the latter was sold for $2.9 million. When the owner put it up for sale, he asked for 48 million. Unfortunately, the initial offer was $280 and a week after the sale, the amount had painfully reached the equivalent of $6,000. In short, we must not lose sight of the fact that all this remains a risky gamble.
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